Good evening StockBandits!
The indexes each faced opportunities to break out from their respective trading ranges heading into today’s session, but a failure to clear resistance resulted in a harsh rejection. A soft open was bought this morning and the indexes actually went positive by mid-morning, but a pullback never found a lasting bid and stocks trended lower for the final 4 hours of the day. We did see a tiny lift off the low late in the day as the closing bell approached, but it was minimal and looked to simply be short-covering.
Today’s trend day not only prevented continuation to the uptrend, but it introduced the notion once again that perhaps stocks won’t climb forever. One day does not a bear (or bull) market make, but the relentless selling and heavy volume that accompanied today’s session was nasty and left a lasting impression to many who had forgotten that prices can indeed move both ways.
Of the two new swings I set up last night, each triggered. XONE was making great headway on the long side, but ultimately the extreme market weakness took its toll to not only erase the early gains but actually stop me out by turning down to break Friday’s low. Fortunately, the FSLR entry was well-timed and my existing short in RAX both helped the intraday plays in VJET and AG to make for a decent day. I don’t typically recap the day’s trading, but today it makes sense because trading both sides (long and short) proved worthwhile. In trading ranges like we’ve been in, I like taking that approach as it keeps me somewhat naturally hedged while allowing for opportunities in both directions.
Tonight the index charts certainly look less attractive and the wide-ranging bars many individual names painted also has made for some sloppier charts.
Let’s get to the charts.
NAZ – The NAZ had been pressuring upper resistance and even today briefly cleared 4177, but as I noted last night it’s the ability to close above it that will matter in terms of a new leg higher. Today it reversed sharply lower from there and even broke 4104, the low end of the range intraday before closing back above it with some late-session short-covering. The range is intact, but it may not be for long.
SP500 – The S&P turned lower today with some intense selling that took it beneath 1823, the low end of the range, and then filled the gap to 1818 I’ve been highlighting here. The December breakout zone of 1813 is now just a few points away, so we’ll see if the bulls are capable of stopping the bleeding or if instead they move to book profits.
RUT – The RUT chart currently contains a bad tick, so I’ll just mention that tonight it bounced into the closing bell to close just above 1147, the low end of the range of the past few weeks and the November high. That puts it at the low end of its 20-point trading range (1147-1167), making it vulnerable here to a breakdown. Should it happen to head lower, 1135 and 1123 are the next levels to watch.
DJIA – The DJIA lagged last week and today it broke the lower end of the range to head back toward the December breakout zone, now just 83 points away.
Notable Names:
MGM may not be done with its current rally but today’s bar had a few features worth pointing out. Price made a new high, then reversed lower to finish negative. We also saw big volume tied to the reversal, which gives the daily chart the look of exhaustion. That would be understandable given the rally this stock has just posted of upwards of 40%, but today’s bar was notable so I’ll keep it on the radar in the days ahead to see if today sets off any continued changes in character.
BIDU has been highlighted here several times showing its habit of clearing prior highs only briefly before pulling back. It’s doing it again here, keeping the routine, but also just broke rising support. That’s not a bullish event and could easily lead to some additional selling in the days ahead.
UA has been very choppy around resistance in recent weeks, then broke higher on Friday but on light volume. Today it reversed course with some intense selling with a nasty downside break of rising support. I would expect bounces now to serve as selling opportunities.
WUBA may need a bit more time but I like the relative strength it showed today. A push through $43.90 on Tuesday and I’ll take it for a single-day play to participate in the initial breakout to a new high. A swing stop would be wider than I care to give this one.
APA is testing support here and a breakdown would start to fill a gap from August. I like it for a play on the short side to participate in the initial move lower as a single-day play. $83.80 is the level I’ll be using for a trade on Tuesday, but I’ll be out by the end of the day.
EGN is also resting on support here and a breakdown through $65.20 could spark more selling pressure here. I like it for a single-day play below that level on Tuesday to participate in the initial move lower, but a swing stop is not readily apparent so I won’t be taking it overnight.
New Swing Trade Candidates:
These stocks look ready for imminent multi-day moves. Pattern confirmation occurs with a move through the entry level. Initial stop and target levels are also provided.
GME is sitting in a small rising wedge here after a hard selloff last week. This looks like a failed bounce in progress, so I’m watching for a downside break of the lower trend line at $44.80 to initiate a short sale for a swing. There’s room for it to head back toward a pair of levels from July and June, and I’ll have a protective buy stop just above the bounce high just in case I need it.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
